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We recommend a buy in the stock of Gujarat Mineral Development Corporation from a short-term perspective. It is evident from the charts of the stock that it has been on an intermediate-term downtrend since encountering resistance at Rs 220 in late December 2012. However, the stock changed direction, after taking support at around Rs 135 this week. This reversal has been triggered by positive divergence in daily moving average convergence divergence indicator and weekly relative strength index.
On Tuesday, the stock gained 5.8 per cent with good volume forming a bullish engulfing candlestick pattern. The daily RSI has entered the neutral region from the bearish zone and weekly RSI is recovering from the oversold area. Taking a contrarian stance, we are bullish on the stock from a short-term perspective. We expect its up move to continue and reach our price target of Rs 150 or Rs 153 in the approaching trading sessions. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 141 level.
( Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)
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